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Gold's run of 4 gains looks vulnerable at hands of recovering dollar

MARKETWATCH 8:41 AM ET 7/20/2017


ECB inaction leaves dollar higher against euro, other major currencies

Gold prices dipped into the red early Thursday, struggling to extend their latest run to a fifth-straight gain, as the dollar again tried again to recover from the 10-month lows hit in recent days.

Market attention was fixed on the latest European Central Bank policy meeting, its implications for currencies, and by default, metals. The ECB, as expected, left interest-rate policy and other stimulative measures untouched. Attention turned to post-meeting commentary from ECB head Mario Draghi (http://blogs.marketwatch.com/thetell/2017/07/20/ecb-live- blog-mario-draghi-walks-the-policy-tightrope/) and whether a tightening is in the works in coming months.

Read:Why Mario Draghi can't back down from ECB taper hints (http://www.marketwatch.com/story/why-mario-draghi-cant- back-down-from-ecb-taper-hints-2017-07-19)

August gold was down $4.30, or 0.4%, at $1,237.70 an ounce, about where it stood ahead of the ECB announcement. The contract settled Wednesday at $1,242, its highest finish since June 30, according to FactSet data. It has tallied a climb above 2% so far this week.

The ICE U.S. Dollar Index , which compares the buck against a half-dozen other currencies, was up 0.3% at 95.11, extending its gain slightly in the wake of as-expected ECB inaction. Euro-dollar was down 0.2%.

A softer buck makes gold more attractive to buyers using weaker monetary units, and vice versa.

"No surprise for the time being when it comes to the [ECB] rate change. The forward guidance as it stands has given a dovish message for the market," said Naeem Aslam, chief market analyst at ThinkMarkets.

"Although the ECB event is an important factor today, we do think the main denominator which matters the most is the dollar here," said Aslam.

As for U.S. data, a Philadelphia-area report did soften, while U.S. jobless claims fell--another round of mixed-big economic news that's keeping financial markets guessing on the likelihood of another Federal Reserve interest-rate hike this year or whether a projected tightening might be put off until 2018. See the MarketWatch economic calendar (http:// www.marketwatch.com/economy-politics/calendars/economic).

Higher rates not only push the dollar higher, nicking gold prices, but also cut demand for nonyielding precious metals in favor of yield-bearing assets.

Among other metals, September silver fell 12 cents, or 0.7%, to $16.17 an ounce.

Read:How silver could bounce back after a 'bearish 2017' (http://www.marketwatch.com/story/how-silver-could-bounce- back-after-a-bearish-2017-2017-07-13)

Meanwhile, October platinum fell by $6.50, or 0.7%, to $917.70 an ounce and September palladium fell $5.60 at $ 853.55 an ounce, down 0.6%.

And in exchange-traded products, the SPDR Gold Shares (GLD) was down 0.4% premarket, the VanEck Vectors Gold Miners ETF (GDX) fell 0.4%, and the iShares Silver Trust(SLV) was down 0.5%.

-Rachel Koning Beals; 415-439-6400; [e-mail]


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07-20-170841ET
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